Enterprise Products Partners LP (EPD) 2015 Q4 法說會逐字稿

Good morning. My name is Ginger and I will be a conference operator today. At this time I would like to welcome everyone to the Enterprise Products Partners fourth-quarter earnings conference call.

(Operator Instructions)

I will now turn the call over to Mr. Randy Burkhalter. Sir, you may begin your conference.

Thank you, Ginger. Good morning everyone and welcome to the Enterprise Products Partners fourth-quarter earnings call.

Our speakers today will be Jim Teague, Chief Executive Officer of Enterprise's General partner, and Bryan Bulawa, Chief Financial Officer. Other members of our senior management team are also in attendance for the call today.

During this call we will make forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 based on the beliefs of the Company as well as assumptions made by and information currently available to Enterprise's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable we can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call.

With that it will turn the call over to Jim.

Thank you, Randy. 2015 was another outstanding year for Enterprise with us reporting record gross operating margin of $5.3 billion supported by contributions from recently acquired and newly constructed assets and increased liquids transportation volumes. This led to record distributable cash flow of $4 billion, excluding the proceeds from asset sales which provided 1.3x coverage of the $1.53 per unit distributions declared with respect to 2015.

Including $1.6 billion in proceeds from asset sales we retained $2.6 billion of distributable cash flow to reinvest and reduce our need to access capital markets. Our businesses continue to perform well despite a challenging commodity environment that included a 60% drop in crude prices since their peak in mid-2014 and lower NGL prices.

Given our low-cost of capital, no IDRs, support from a strong general partner and our diversified, tightly integrated assets, we believe we're well-positioned to manage, adapt and grow. We entered 2016 with solid financial flexibility, BBB+ investment-grade ratings and healthy distribution coverage. We have over $6 billion of capital projects that are scheduled to begin operations over the next two years plus additional ramp-up commitments on some of the assets we have recently put into service, all providing support for continued growth in our distributions.

Like the three previous quarters we also ended 2015 on a strong note with fourth-quarter results that included increased gross operating margin contributions from three of our four business segments and distributable cash flow of $1 billion excluding proceeds from asset sales which provided 1.3 coverage of the cash distribution declared with respect to the fourth quarter. Including $71 million in proceeds from asset sales, we retained $302 million of distributable cash flow in the fourth quarter of 2015.

Earlier this month we also announced an increase in our cash distribution to $0.39 per unit with respect to the fourth quarter of 2015, a 5.4% increase over the distribution for the fourth quarter of 2014. We also announced our plans to recommend to the Board of our general partner that Enterprise continued to increase the distributions during 2016 by $0.001 per unit per quarter for each quarter in 2016. This would result in distributions with respect to 2016 of $1.61 or a 5.2% increase over the $1.52 per unit paid with respect to 2015.

We're proud of our results but we don't take anything for granted. It's not business as usual for anyone in our industry. Crude oil and NGL prices started 2015 at levels that we thought were low and generally had a downward bias all year.

Futures prices fell more or less in lockstep with weakness in the cash markets. Inflation adjusted prices for crude oil, natural gas and most NGLs are at lows that go back as far as 1999. We don't think anyone knows how long the depressed prices will last, how low they can go or how we are going to redefine normal after we finally start to see some stability.

We have too much supply partially caused by rapid growth from US shales. History tells us that this won't last forever and at some point we'll come out of this cycle. History will also tell us that not everyone will make it through this cycle, at least not in their current form.

For some the deck is stacked against them for various reasons. Our experience has taught us that you need to understand your business and be prepared for the lean times, otherwise you will find yourselves reacting to negative events.

For some the current downturn is also confirming that you better not have built your business plan on 'me too'. You should understand both the supply and demand side of your markets and understand your competition and be close to your customers. Tight integration versus just a collection of assets is more important than ever.

As margins shrink being able to continually reduce your cost per unit handled is critical. History shows that you can count on Enterprise. Our structure is simple, our credit rating is excellent and our 2015 performance certainly shows that we understand our business and how to behave during difficult times.

In addition to our focus on serving the largest basins in the US we continue to focus on cultivating markets both domestically and globally. We brought the last two segments of our Aegis ethane pipeline into service in 2015. That pipe is essentially fully subscribed as the global petrochemical market continues to be attractive to plentiful US feedstocks.

In late December we put our latest LPG export expansion in service and are pleased as its performance exceeds expectations. We continue to add new customers needing long-term capacity, including a recent seven-year agreement with a new Asian customer. Our terminal is over 90% subscribed through 2019 and we have contracts extending well into the 20s.

In the fourth quarter we announced that we sold long-term space in our ethane export facility, taking its committed capacity up to around 180,000 barrels a day. This facility is expected to be up and running in the third quarter. The Aegis pipeline, our LPG export and our ethane export will be new growth engines within our NGL pipelines and services segment which reported gross operating margin of $730 million for the fourth quarter and $2.8 billion for the year.

As to our PDH plant at Mont Belvieu, construction continues. This asset is commercially structured as a large fixed fee arrangement that is 100% backed by long-term contracts with investment-grade companies. Our PDH plant is an example of extending our value chain, in this case substantially upgrading the value of propane.

We're still targeting to begin commissioning activities by year-end. We use this value chain model in other assets, including MTBE and high purity isobutylene facilities. Both of these facilities upgrade our butane into much higher valued products.

Our Petrochemicals & Refined Products sector reported gross operating margin of $171 million for the fourth quarter compared to $199 million for the fourth quarter of 2014. Our fourth-quarter results were negatively impacted by an unplanned outage at our MTBE plant that began in mid-November. But as a result, we decided to accelerate the planned annual maintenance and expect it to be in service sometime shortly after mid-February.

Our Petrochemical & Refined Products segment was our only segment that didn't show improvement in the fourth quarter. However, in spite of the MTBE outage this segment still reported $719 million of gross operating margin in 2015 which was a $38 million improvement over 2014.

Our Crude Oil Pipelines & Services segment reported gross operating margin of $250 million for the fourth quarter compared to $228 million for the fourth quarter of 2014. 2015 results for this segment was $962 million which was a $200 million increase from 2014. This segment includes the EFS Midstream assets we added in the third quarter of 2015, our new crude oil distribution system and the new crude oil terminal capacity we have added primarily in Houston and Beaumont.

Work continues on the Midland to Sealy crude oil pipeline. This project is 60% contracted as we have added a contract in December and discussions continue with other Permian producers. This current environment is tough for producers but the Permian is truly a premier basin which is why even in today's environment there are nearly 200 rigs running.

Also in the Permian we're constructing two new processing plants for a total of 400 million cubic feet a day in incremental takeaway. Both of these plants will be completed and in service later this year.

Our Natural Gas Pipelines & Services segment reported gross operating margin of $194 million for the fourth quarter compared to $185 million in the fourth quarter of 2014. 2015 results for this segment were $783 million which represents a $21 million decrease from 2014. This segment includes our Acadian gas, Texas intrastate, San Juan and Jonah natural gas pipelines.

Segment results for the fourth quarter were up slightly compared to fourth-quarter 2014, primarily due to lower pipeline operating costs. Results for the full-year 2015 were negatively impacted by lower revenues from our San Juan system where transportation fees are indexed to regional energy prices.

We see upside in this segment due to projected higher natural gas demand for power generation, exports to Mexico and LNG and industrial demand, all of which is Gulf Coast-centric where our pipes are located. With our initiative on processed condensate it's probably no surprise that we've been a very strong supporter of lifting the crude oil export ban. Our processed condensate ruling was only a first step to ultimately lifting the ban.

We get a lot of questions of what this means for the US oil and gas industry and for Enterprise. Today's price environment spreads do not generally support significant crude oil exports. However, we believe that as we move out of this cycle the world will recognize the abundance of our resources, the benefits of supply diversification and they know they can count on the US producers.

We also believe that global consumers will soon view the US as a place to invest in reserves. Ultimately we believe that lifting the ban will be a real positive for the US, will be a stabilizing influence for global oil and gas and will ultimately be very positive for Enterprise.

In closing we want to recognize our employees. 2015 was very rough for our industry and 2016 appears could be even more difficult. Our results are first and foremost a result of our people's resolve to excel.

None of us take it for granted and we don't think we can say thank you enough for all that they do. In this environment all we can do is make sure we keep our eye on the ball, continue to perform and continue to focus on building our future. That's what we did during the downturn in the 1980s, in 2001, in 2003, in 2009 and it's what we have done since the current trough cycle started in mid-2014.

Thanks to a strong asset base and to our extremely dedicated and talented employees in spite of the volatile markets Enterprise reported yet another strong quarter and strong full-year for 2015. We enter 2016 on solid footing and we fully expect to continue to deliver. And with that I'll turn the call over to Bryan.

Thank you, Jim. I will cover a few additional income items for the quarter and the year as well as an overview of capitalization.

Before doing so I'd like to reiterate comments we've made in the past about revenue. The changes in revenue and operating cost and expenses are largely influenced by the changes in commodity prices and are not necessarily good indicators of the performance of our Company.

So while revenue was down 44% for the year our associated costs and expenses were also down 46%. We believe gross operating margin is a better performance-based metric which was a record $5.3 billion in 2015.

With that said, net income attributable to limited partners was $685 million for the fourth quarter of 2015 or $0.34 per unit on a fully diluted basis. Net income and fully diluted EPU were reduced by non-cash asset impairment charges totaling $24 million or $0.01 per unit. General and administrative costs were down $14 million this quarter compared to the fourth quarter of 2014, primarily due to $10 million in nonrecurring expenses recorded in the fourth quarter of last year related to the Oiltanking acquisition.

Total capital spending in the fourth quarter of 2015 was $1.2 billion including $77 million for sustaining capital expenditures. For the year capital expenditures were $6.4 billion which included $1.4 billion of equity issuance for the completion of the Oiltanking transaction last February and $1.1 billion of cash in connection with the first installment payment for the EFS Midstream acquisition in July 2015.

Sustaining capital expenditures were $273 million in 2015. We currently expect gross capital expenditures to be approximately $2.5 billion to $2.8 billion in 2016 and sustaining capital expenditures to be approximately $275 million. Adjusted EBITDA for the 12 months ended December 31, 2015 was $5.3 billion.

Accordingly our consolidated leverage ratio of net debt to adjusted EBITDA was 4.2 times after adjusting for 50% equity treatment for the hybrid debt securities. At December 31, 2015 the average life of our debt was 14.1 years using the first call date for the hybrids and 17.3 years using the final maturity date for the hybrids.

Our effective average cost of debt was 4.7%. We had consolidated liquidity of $4.4 billion at the end of the year which included available borrowing capacity under our credit facilities and unrestricted cash.

In 2015 we raised approximately $1.2 billion through a combination of our distribution reinvestment program, employee unit purchase program and our ATM equity program including $177 million in the fourth quarter. These figures are inclusive of the aggregate $200 million investment in EPD common units made by affiliates of privately held Enterprise Products Company or collectively EPCO during 2015.

With respect to 2016, EPCO and certain of its affiliates plan to purchase an aggregate of $200 million in EPD common units in the first quarter of which $100 million was purchased through the ATM program during the first week of January. EPCO and certain of its affiliates plan to purchase the other $100 million through the partnership's distribution reinvestment plan in February or next week.

Also EPCO has stated its intention to evaluate the purchase of additional common units during 2016 to further support Enterprise growth. The current commodity price cycle has raised the concerns of analysts and investors alike with respect to customer credit risk. Managing and monitoring credit risk is and has been a top concern for Enterprise.

To that end we have a customer profile with approximately 80% of our top 200 customers by revenue being investment-grade rated or secured by a letter of credit. Those top two customers account for approximately 99 -- a little over 99% of our 2014 revenues. Digging deeper into the numbers, Enterprise has exposure to eight subinvestment-grade independent E&P customers and this group accounted for only 2.4% of our 2014 revenues.

And with that I will turn the call back over to Randy.

Thank you, Bryan. Before taking questions, Ginger, I'd like to mention that the Enterprise and Oiltanking K1s for 2015 are expected to be available online by noon Central Time on Tuesday, February 23. Of course we will announce this with a press release also when they are available.

So, Ginger, I think we're ready to take questions now.

(Operator Instructions) Darren Horowitz, Raymond James.

Good morning, guys. Jim, back to some of your earlier comments about the $6 billion of projects that you expect to place into service over the next two years.

And I realize this is tough to say but when you look at that project set relative to the returns that you expect to generate on the $2.5 billion to $2.8 billion of growth CapEx you're going to spend this year, is there that much of a difference? I'm just trying to get a sense for how the return metrics have changed and how much of an influence maybe the changing cost of capital has had relative to market-driven margin compression or anything you're seeing out there from a customer perspective or at least the risk of facilitating those assets?

I don't think we've seen any decline in the return rate, Darren, and I think I mentioned that we've in December -- was it December, Bill, we signed a new contract on that Permian pipeline and frankly we're in some discussions with a couple of other folks that I think executing those contracts are fairly imminent. So we just keep going.

Okay, and then my follow-up question, and you all have had this slide in your slide decks for a long time, but specifically in the analyst slide deck that you all had last year there was some information that was outlining the indicative amount of growth CapEx that was required to support that $0.08 per unit distribution growth based on return of capital assumptions that were out there and there were a couple of different targeted return metrics. I'm just wondering from a financing perspective, given that you have obviously a lot of parental support, you have excellent retained cash and a lot of financial flexibility, is it still the assumption that you can assume that 10% targeted return and meet that distribution growth maybe by leaning more on 100% retained DCF or maybe a bit more on more retained DCF in a blend of debt financing? And if that ends up being the case, is the applicable number still between $1.5 billion and $1.8 billion of growth CapEx in order to get those returns?

Hey, Darren, this is Randy. You know I will be honest we've not updated that chart probably here in a couple of months. We will have it updated for the analyst meeting.

The one thing we just have to factor through there, certainly the last two months if you take a snapshot just as far as where equity yields are and where cost of long-term debt capital is that's moved up call it maybe 100 basis points on a weighted average cost of capital basis. So that would have an impact on the amount of growth CapEx that you're assuming at all those return levels. So really we just need to come in and work the math and we'll -- stay tuned in March, we'll have it for you then.

Okay, I appreciate it, Randy. Thank you.

Brandon Blossman, Tudor, Pickering, Holt.

Good morning, gentlemen. Let's see, let's start with a fundamentals question.

LPG exports, propane, butane, propane in particular doing very well here, continuing to hit globally kind of new records on US throughput through the terminals. Is there a risk, and this is probably a 12- to 18-month risk, is there a risk that we don't have enough supply out of Texas to meet global demand profile? So it's a global-supply demand question as it's focused on kind of US liquids production.

So you're saying is there a risk we have a high-class problem, don't have enough supply?

Yes, that is exactly right.

I think we've got plenty of pipelines that can access other regions to bring supply down to the Gulf Coast. We can --

And I'm more concerned about just basic production and what the production profile looks like over the next --

Let Tony take a shot at it.

You could make a case, who knows exactly where liquids productions how it's going to be impacted for 2016? So I could run a scenario where supply would get tight but you have to realize that the export market is a very dynamic market and it responds to price. And so that's what I think is going to happen to that market. Very liquid.

What you're saying the reality is price will solve any supply issue. Meaning if it reaches that point, the ARB will close and you'll have somebody won't be exporting.

Okay, fair enough. And then perhaps an easier question, the CapEx range, $300 million for 2016, what would push it to one end or the other?

Really just getting it as far as the growth CapEx, $2.5 billion to $2.8 billion, yes, that's just the timing on how the cash would go out the door.

And any incremental cost savings available out there as demand for new projects shrinks?

In terms -- you're talking about on CapEx projects? Or just in general?

No, no CapEx projects specifically.

Graham, are you seeing any?

We're seeing, particularly pipelines outside of the greater Houston region we're seeing some cost savings on our capital projects. Inside the greater Houston area where there's a lot of petrochemical competition for materials and labor, we're still seeing pricing hold steady.

But you're not seeing them go up.

No, we're not seeing any significant increase. And we're not seeing -- labor is readily available to do all the projects that we're in the process of executing.

Okay, thank you. That's useful.

Sunil Sibal, Seaport Global Securities.

Hi, good morning guys and congratulations on a good solid quarter. So when you look at the onshore crude segment, it seems like there was about a 7% or 10% decrease in sequential volumes. Were there any one-time factors which contributed to that or any specific regions which contributed to that?

Are we talking about the downturn in crude throughput? The issue is less production in some of these basins and the Eagle Ford is a classic example.

So we're having, our lease buyers are having to hustle a lot more to retain control of volume. And that's probably the area that we are probably putting the most effort in to shore up over the next year. We've made some changes in that area.

That's helpful. And then in terms of your project pipeline just to follow up to a previous question, when you're bidding on projects are you looking at enhancing your returns to counter the higher cost of capital while you're bidding on these projects?

Absolutely. We're being very disciplined.

We're not going to get aggressive just to get a project. We're going to get a project because it fits, its strategic and it's got a good return and we will walk away from those that aren't.

I'd add to that also that we really didn't lower our return expectations over the last three or four years just because the cost of capital was less.

That's fair. And then just lastly if you could remind us on that Centennial pipeline reversal any progress on that those discussions?

Those discussions are ongoing. We're pretty well aligned now in that with the Marathon MarkWest combination MarkWest has a need to continue to grow up there and Marathon being a 50% partner in Centennial has aligned with us. So we're all aligned, discussions are ongoing and we'll see where it develops.

Okay. Very helpful guys. That's all I have. Thank you.

Jeff Birnbaum, Wunderlich.

Good morning, everyone. So just on kind of follow up on the growth CapEx, the $2.5 billion to $2.8 billion seems a bit lower than what it sounded like you were thinking in October when I think you had said that you expected total CapEx to be around $3.2 billion to $3.5 billion. So just kind of curious if there's been anything pushed out there or what's driving that somewhat lower outlook or is that entirely from just timing changes and/or cost savings?

Yes, Jeff, this is Bryan. It's really more just a shifting on timing. Obviously we're just trying to optimize the timing of our spend and that's where you saw that a little bit of a shift.

Okay. Thanks, Bryan.

And I guess, Bryan, I think you had said that leverage at the end of the year was 4.2 times. Are you still thinking that it's likely to peak around 4.25 early this year or have there been any changes to that?

Jeff as we continue to move through our spending cycle we're peaked toward the middle of the year. So our leverage will probably peak somewhere in that area of 4.25 to 4.5 times without adjusting, without any adjustments, just straight-up leverage.

Right. And just one last one for me on the balance sheet issues. I guess just curious you mentioned obviously EPCO stepping up in the first quarter here and willingness to potentially purchase more through the year. I guess just kind of obviously Enterprise's cost of capital hasn't been hit as hard as many of your peers have, but do you see any changes to how you are planning to finance capital needs this year or is there a way to sort of put any numbers or parameters around how much EPCO might be willing to purchase as you go through the year?

Yes, this is Randy. EPCO is still coming in, as Bryan mentioned earlier they are still coming in and evaluating additional purchases for the remainder of the year but has not made any decision at this point. But I really, I mean coming into 2016 we're really looking at it the same way we did in 2015 and 2014, that the funding will be a combination of retained distributable cash flow.

We've shown over the last couple of years that we're willing to come in and sell non-core assets, so we're willing to do that as well. And then equity raise and then a debt component also.

Thanks. So just one quick operational question from me.

The $50 million gross operating margin contribution from EFS Midstream was a nice increase sequentially. I guess I know you had spoken about or you have spoken about taking cost out of that systems, so I was just curious if you can give us some color on the breakdown there in terms of that increase, quarter-over-quarter volumes versus just sort of cost savings.

This is Bill. I'm really not sure what your question is, taking cost out of the EFS system. We've integrated it in with our South Texas operations and probably taken some cost out of it from that perspective.

And we continue to look and discuss opportunities with third parties other than the two companies we bought it from. We're having some promising conversations there about hooking up some others to the system.

Yes, I think that's basically is what I was getting at. All right, thanks a lot guys. Congrats on the quarter.

Matthew Phillips, Clarkson's.

Good morning, guys. A follow-up on EFS assets.

Pioneer is a pretty good partner to have in this environment that they are laying down rigs in the Eagle Ford. Has this changed at all how you view the transaction in the near-term or are you able to look through to 2017? And with Bill's comments just now about hooking other customers up do you think that can offset any other declines?

In the near-term we have further than just the near-term we have demand fees associated with that system from the anchors. So we don't really view it much differently. Maybe a little less upside but as far as the economics go they are still sound.

Got you. And shifting over to LPG exports, there's been a pretty clear downward trend in global pricing compared to US pricing since you and others really have ramped up exports 18 months ago or so.

But it still seems you're able to add another year on your term contracts. Could you all discuss just the dynamics in that market and are you still seeing demand for US volumes out in early 2020s?

Al didn't get it, I'll try to take it. You know what you have whenever you look at the ARB you're looking at spot freight rates, a lot of these guys have their own ships under time charter. So that doesn't necessarily mean heck of a lot to them.

But we haven't had a single cargo canceled and propane and to some extent butane in the US it's got a price to export to a point. And that's what we're seeing.

Remember, too, a lot of our stuff, over half I think, Al, goes to Central and South America. So their alternative is from the AG and that's quite a haul.

Do you expect with the expansion online now that you'll maintain that percentage going to Central and South America or more of those going to be long haul to Asia?

I think we'll continue the percentage. It's interesting we've had -- we've signed two large contracts with Asian companies, one going to Japan and one South Korean company. It brings to question, and it kind of raises the same issue with crude oil, these guys are looking to diversify their supply, so strategically it's important to them to have some volume tied to a transparent pricing point like Mont Belvieu in order to have some alternatives to the CP price out of the Middle East.

Great, thanks for the color.

Kristina Kazarian, Deutsche Bank.

Hey guys. Randy, I know both of you and Bryan touched on this a bit. Could you guys just explicitly lay out for me in 2016 both the equity and debt needs?

And on the $1 billion final payment is that already funded? How do I finance that and when does it hit?

Is it second quarter or third quarter? I think you guys said before July but that would be helpful.

Kristina, the second installment is in July as far as on the EFS Midstream deal. And it's just not our practice to come in and get, lay out what our financing plans are in specific detail.

Okay. How about non-core asset sales?

You touched on that in one of the previous answers to your question. How should I be thinking about that in 2016?

Yes, you know that on that front I think you have a lot of private equity money looking at midstream assets. I think more your strategic players, and frankly that's probably where you could get some higher value for some of these assets, are from the strategics.

Right now some of them are -- their cost of capital has gone up as a result of where the capital markets are. So the strategics may be less of an opportunity to transact with them but maybe an opportunity with sales to private equity.

Sounds good. And then I know you guys mentioned contract terms on some of the projects the four major projects you guys have coming online in 2016.

But are you guys feeling pressure at all from people or customers to move away from your historical -- you're looking for your steady fee-based take-or-pay terms and just what sentiment there is? And I know you guys probably will say you're not moving away but just pressure in the environment would be helpful.

We're in a lot of discussions with a lot of producers that as contracts roll off you've got to get creative and you got to be willing to develop a product that they'll buy. So it's not necessarily the same sort of a deal that you did initially. That's just reality and we been through that cycle more times than I like to think of and that's how you behave.

Great, that's it for me. Thanks guys.

Ted Durbin, Goldman Sachs.

Thanks. Just quickly what is your view just from a macro perspective what it will take to rebalance the propane market here?

Is it more exports, is it PDH? Just kind of walk us through that view.

It's probably both, Ted, you know as PDH comes on. But each of those plants doesn't use just a boatload of propane. They use what about 35,000 barrels a day per plant?

But that's what I said earlier, it's got to a point it's got a price to export. But also I think there are contracts we have that are not spread sensitive. They are source sensitive.

Okay, so exports mostly. All right, you talk about the ethane recoveries being strong this quarter. You had a big uptick in your equity volumes, what's driving that?

I'm sorry the question is --

I'm sorry the ethane recoveries are strong and a big uptick in your equity volumes.

Yes, we've got a discretionary recovery. I think I've talked about that before. If the producers elect what we call conditioning mode their percentage of the ethane goes down.

And we have the ability to extract that ethane if the economics work for us. And typically at certain facilities we're working on variable cost economics and it does work for us. So where we can do that and particularly where we can lock that ethane in going forward and make some money on it we do it and I think we've done quite a bit of that here recently.

Got it. And then just we've talked a little bit about on the industry here, the comments up front around not everybody is going to make it.

What does that imply for you more specifically? Rather than selling assets maybe are you willing to come in on a JV basis on maybe some projects where companies are having issues with financing or is it more just buying assets outright, buying entire companies outright? I'd just love to hear your thoughts on that.

We have a lot of joint ventures and we're not afraid of joint ventures but joint ventures have to be assets that fit what we are and who we are. So I don't think we're going to go out and do a joint venture to help a competitor with his financing needs.

We may very well look to joint venture a pipeline or a plant or something with a producer or a consumer that either brings feedstock to the plant or consumes feedstock off the plant. That's historically how we've approached joint ventures.

Got it. I'll leave it at that. Thank you.

Jeremy Tonet, JPMorgan.

Good morning. I just wanted to follow up little bit more on that last discussion there, and going back to what was mentioned earlier in the comments as far as this being a challenging cycle and not all of your peers might make it through in their current form and EPD's appetite to get involved in that process and take advantage there or just the organic growth opportunity set in front of you is sufficient for what you're looking for and there's no need to go out and get involved there?

I'm going to try it and then I'm going to give it to Randy and Bryan. You know, we're not licking our chops to go out and find things we can buy. It's just like our organic projects and it's just like how we approach joint ventures.

Strategically it has to fit us and Oiltanking is a classic example of Oiltanking fit us. It filled a void that we had and we wanted it.

But just to go out because something is cheap with a pipeline that's not connected to where we are, we're really not interested in that. Randy, do want to take a shot, what else was it?

Yes, and, Jeremy, I come back and really echo Jim, our primary goal right now is to execute on the organic growth projects that are currently under construction but also some of those that are in the discussion development phase as well. I think from an M&A standpoint I have often said the first rule is do no harm.

And in this market I think you need to be very deliberate but we will come in and look at opportunities. I think the distress caused by this cycle may provide some opportunities but we're going to be pretty deliberate as we go through and take a look at them.

And if you look at what we're doing and if you listen to and read the script of Bryan and mine, almost everything we talked about in there were demand pull projects. The only supply project that we're doing right now I think, and I'm looking around the table, is our Permian pipeline.

And that's strategic because we felt like we really needed to be in the Permian that we think so highly of it. Things like export facilities and Aegis pipelines and ethane export facilities and PDH plants, we like those things.

That's really helpful. Thank you for that. Just one last one if I could.

As far as the asset sale, sorry if I missed it this quarter. Could you share any more color on what that was?

We sold our Rocky Mountain crude oil business and then we sold some marine assets, offshore crude barges and tugs.

The Rocky Mountain crude oil business was a marketing business.

It was a marketing business. It had a few truck unloads and it fit somebody else much better than it fit us.

It's a classic example. We're not going to -- we're not afraid to prune.

Great, thank you very much.

Helen Ryoo, Barclays.

Good morning. I had a question about your CapEx and you've touched upon it a little bit but Bryan when you said you're optimizing timing of certain projects just wondering if any of that, I mean they are mostly more midstream type of projects that are being pushed out in anticipation of producer CapEx cuts. And also on that CapEx guidance for the year I'm just wondering how much of the Midland to Sealy spending is included, roughly speaking half or less than half?

Well, we're not going to give you specifics around that. But you're hunting in the right blind.

Okay. You mean related to the first question, the optimizing timing of certain projects it's mostly midstream related to producer activity, is that what it is?

No, with respect to what if you think about if there's a shift you look at the projects that are scheduled to be completed post-2016 and that gives you a sense of which projects we might have a shift in spending. And it's just a timing matter.

We're not going to shift it beyond what our obligations are. So when he says optimizing we're still going to bring it on when we're obligated to bring it on. We just may not bring it on early.

Yes, and Helen, with respect to Midland and Sealy, really the bulk of the CapEx around Midland to Sealy is more in 2017 than what it was in 2016. And pipe has been ordered on that but again the bulk of the costs are in 2017.

Okay, that's very helpful. Then just on petchem business you mentioned the outage, the MTBE outage and that's coming back online in February. So are you able to quantify the effect and maybe just would the first quarter be somewhat similar to fourth quarter given this dynamic?

This is R.B. First quarter will be similar because we'll have a little over a full month of operation in the first quarter like we did in the fourth quarter. But our outage was going to extend longer, so initially we would've had more in 2015 and less in 2016, so starting the turnaround early puts more into 2016.

You might mention why we're turning it around, what we gain from that.

In addition to our turnaround we're also doing a pretty substantial capital improvement project out there at the MTBE plant. And what that will do is historically we've taken an annual turnaround and this project will allow us to run anywhere from three to four, potentially more but we're counting on we're saying three for now, years between turnarounds. And that will be producing more margin every year going forward.

And just if this particular segment it's not, could you remind me how sensitive it is to commodity price? It's probably not as sensitive as of course your processing business.

It has some sensitivity but the need for octane is still very strong right now even in this environment. And so MTBE is still very good business.

Not only that, it gets less sensitive, Helen, as we bring on the PDH plant.

Got it. All right. Thank you very much.

Poe Fratt, D.A. Davidson.

Great, thanks for taking my question. I had two.

One, in the commentary on the crude oil pipeline side you highlighted that marine loading and unloading volumes were down more than 200,000 barrels a day and I was just wondering what's going on there competitively? I hear a lot of other companies investing in marine storage and terminaling and just wondering if the landscape's changing at all or whether that's just pricing stress?

Did we say loading or did we say marine? It could be that it's less imports as production is more adequate coming out of the US.

Yes, what we from a marine volume standpoint I think year over year we were about flat at 1.2 million barrels per day. But to Jim's point, it has shifted where you have -- we had less barrels on the unloading side and more barrels on the loading side. So more barrels on the export side.

We make more money on exports than imports as a fact, too.

Got you. And then to quantify was it a $10 million hit on the MTBE or was it less than that?

Ballpark as far as fourth-quarter impact from the facility going down is call it right around $20 million.

Great, thank you.

Faisel Khan, Citigroup.

Good morning. Just a couple of questions.

One is just on the NGL Pipelines & Services segment, the $12 million increase in gross margin that what you talked about as being benefited from the LPG exports and then the $58 million increase in NGL pipeline and storage which you also attribute to higher loading and unloading volumes at the NGL marine terminals, how much of that is I guess attributable to the expansion that came online in the fourth quarter?

Really none. Because the expansion really came on at the end of the year. And so really the benefit from that you'll start seeing in the first quarter of 2016.

We did our smaller expansion. It did come on earlier in the year, so that probably attributed some to that.

This is Al. We also continue as we said last year month after month continue to expand and grow our butane export business. So in addition to the propane expansion we still have capacity to load normal butane, isobutane or mixed butanes and again we have pursued contracts there both on a spot and term basis.

Okay, got you. And how much was I guess through you said you received term contracts on a spot and term basis, but how much of that was I guess the spot volumes would be through your marketing arm and then the term contracts would be through the pipeline and storage business, is that right?

Yes, the way the gross operating margin from LPG export activity show up, it really shows up principally on two assets that are in that petrochemical or in the NGL Pipelines & Services segment. It shows up at the dock and then it shows up at the pipeline that services the dock and then the other piece of it shows up through NGL marketing. So it's really in three assets.

Okay and then just last, on the last quarterly call you guys gave an update on what shipping costs have sort of done over the course of last year. Do you have any update to that, where are we with the cost to get LPG out of the US?

It's gone down dramatically. Al, have you got the numbers?

We saw it go as high going into the Asian markets over $200 a ton. Europe I think got as high as $125, $130 and it's come down significantly. Quite a few ships have been added and will continue to be added.

So what is it now to Europe, $40?

Yes sir, roughly.

$40 a ton right now to go to Europe?

Call that $40 to $50. But that's down from $125 and it will go down further because there is a lot more ships coming on the market.

Okay, got you. And last question, it looks like maintenance CapEx was trending down in the quarter. Just trying to understand what's going on there, is this the right level that we need to look at going into the rest of 2016?

Will you take it, Graham?

In terms of the maintenance capital nothing significant, just we evaluate projects as we go through the year and we think we've got the right level and we're going to be right about that level in 2017 or 2016. No substantial changes in our plan.

Okay, because it was down, it looked like it was down roughly 5% from where you were trending during the year. And I'm just wondering if that was related to the sale of the offshore business or maybe also you have new projects coming online so I thought that would be a balancing sort of number.

Just the way the sustaining capital, our maintenance capital is just not that consistent. Some timing issues, particularly a lot of it is a number of smaller projects, and it will vary, 5% variability quarter to quarter is nothing out of the ordinary.

Okay got you. Fair enough. Thanks for the time.

John Edwards, Credit Suisse.

Yes, good morning everybody. Nice quarter. Just could you talk a little bit about the customer credit exposure?

I know you said a lot of things are downstream oriented. Obviously with the pressure on commodity prices maybe you can give us a rundown on how you see that exposure this year.

Sounds like a Bulawa question.

Yes, John, in my comments actually I went over that we have eight subinvestment-grade independent E&P producers in our portfolio as measured against. That represents about a little over 2%, or 2.4% is what I said as far as measured against 2014 revenues. Otherwise the other proportion which you might have missed in the call was about 80% of our overall customer profile is investment-grade.

Okay, I missed that. Thank you for that. And then if on the as far as the outlook here volumes generally and maybe if you could comment on declines you're seeing in the Eagle Ford in particular that would be helpful.

I mean we are seeing some declines. They are not dramatic at this point in time but we're seeing some declines on our system. But we do have largely on that system it's take-or-pay arrangements with efficiencies due to the producers if they drop below certain levels.

Okay. And then how are you seeing things in the Eagle Ford?

That was the Eagle Ford.

That was the Eagle Ford.

Well, that is the Eagle Ford. Okay, all right. Is that matched generally across the system not seeing a whole lot of declines?

I think we're seeing the Permian is going up. We're gaining volumes in the Permian and the rest of the system I think is fairly flat and the Eagle Ford is the place we're seeing some declines.

Okay, that's helpful. I think that's all I had.

Chris Sighinolfi, Jefferies.

Hey, good morning guys. Bryan, I just want to follow-up with you.

Thinking about the financing side of the equation for 2016 just wondering if there's some things that maybe are less obvious to us that might be benefits? Thinking about your storage position for example and the reduction in commodity prices, are there working capital benefits of any meaningful degree that you're anticipating that we should be aware of or things of that nature that we could maybe pay attention to in terms of addressing some of the open exposure on the financing side?

Well, just on the working capital side we actually probably will see, and that will probably add to some of the comments made earlier around leverage, is you actually would say probably an increase. Because I think we're seeing -- we expect to see in this sort of environment opportunities that would consume capital with respect to just short-term opportunities around back-to-back type marketing activities and across the commodities.

Okay. That's helpful. And then -- sorry, go ahead, Randy.

Yes, this is Randy. I think some of the things that we're seeing some opportunities if you go back to 2009 we saw a good bit of opportunity from a contango standpoint and to the extent that we have storage capacity we will take advantage of that. We did some of that in 2015 and so again seasonally that would affect you upon a working capital standpoint.

Okay, and then a final question for me is just with regard to any known planned maintenance outages or turnarounds like what you experienced here in the fourth quarter, anything that you could highlight for us that we should make sure we have in there on a quarterly basis throughout the balance of 2016?

The only real planned outage that we have this year is in late in the third quarter for our -- one of our ISO units, we're doing some taking it down for some inspection work but that's about it.

All right, thanks a lot for the added color this morning. I really appreciate it.

Selman Akyol, Stifel.

Thank you. All my questions have been answered. I appreciate it.

Harry Mateer, Barclays.

Hey, good morning guys. This is Greg sitting in for Harry.

Just a quick question on the debt side of things. I was wondering if you can give us your updated thoughts around your hybrids? That one of them is callable in the next six months, just looking for your updated thoughts there. Thanks.

It's interesting that we are coming up on the first call date on the hybrids that are outstanding. And if you would we're in another period I guess similar to when we issued the hybrids a while back as far as in a stress-related period. You have some companies coming out now with hybrid-type securities.

It would be counter to the trend if we called the hybrids when everyone else is issuing hybrids. So the purpose of those securities were to give us some flexibility in difficult times and right now we're in one of those times.

So again we'll evaluate it when we hit that first call date. We're not on the first call date now but if we see market conditions the way they are now our expectation is we'd just leave them out.

Yes, that makes sense. Thank you very much.

Ginger, this is Randy. We have time for one more question.

No further questions in the queue.

Okay. If you don't mind, Ginger, would you give our listeners the replay information for the call?

Certainly. Please note that the replay will be made available today January 28, 2016 at 1:00 Eastern Standard Time until February 4, 2016.

You may access the replay by dialing 1-800-585-8367. Again, that number is 1-800-585-8367. Enter the conference ID number of 20726756.

Thank you for participating.

This is Randy again. I would like to thank everyone for listening in on our call today and that ends the call. Thank you and have a nice day.

This concludes today's conference call. You may now disconnect.